People with savings accounts in credit unions will not lose their money even if the branch closes or merges with another in a neighbouring suburb or town.
Up to one in five credit unions are at risk of closure, but the department of finance has re-assured customers that savings of up to €100,000 per account are covered by the bank guarantee.
Like the banks credit unions are suffering from bad debts arising from the inability of customers to service their loans.
A leading credit union insurer has warned that 79 of the country’s 413 credit unions were under threat.
John Lass of Cuna Mutual said Ireland may follow the US experience where credit unions have been forced to merge.
CUNA Mutual, which is the world’s largest credit union insurer told a conference that there were significant assets in Irish credit unions and there were was significant potential for growth.
However Lass said there needed to be change in structures including mergers and the sharing of administrative functions to reduce costs.
Earlier this month the Registrar of credit unions identified 'high risk' credit unions which were in danger of collapse because of their level of loan losses.
The number nor the identity of those credit unions was confirmed. Every credit union is owned and operated individually which means they can’t benefit from the economies of scale like conventional banks which own a nationwide network of branches.
The government has announced a review of credit unions and the scale of potential losses will be front of mind.
Credit union analyst Bill Hobbs told the Independent that a collapse of some credit unions could cost the state around €500m.
The Government is to set out the terms of Commission on credit unions within the next fortnight.
Identifying the scale of potential losses and whether the Credit Union movement can absorb them without outside assistance are likely to be the key questions.
